Molson Coors earnings lag as craft breweries hurt sales

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Dive Brief:

Molson Coors had net income of $321.7 million in the second quarter, up from $309.3 million a year earlier, the company said in a statement. Sales declined to 0.6% to $3.091 billion, down from $3.109 billion. Analysts had forecast sales of $3.1 billion, according to Financial Times.

The beer giant said U.S. domestic sales-to-retailers volume dropped 1.9% for the quarter. This was driven by lower volume in the premium light and below-premium segments, and partially offset by growth in the above-premium segment.

Dive Insight:

The challenges plaguing Molson Coors are no different than those affecting AB InBev, particularly in the all-important U.S. beer market. Just last week, AB InBev announced that revenues declined 0.2% in the second quarter and 1.3% for the first half of the year in the U.S.

For Molson Coors, it reported a meager 0.3% rise in U.S. sales to $2.139 billion. Volume sales to retailers declined 1.9% for the quarter. The United States is responsible for nearly 70% of the company's revenue.

The problem for major beer producers is simple: A growing number of alcohol drinkers, particularly millennials, are gravitating toward trendier craft brews with bold flavors and catchy names such as Brew Free! or Die IPA and Hoptimus Prime. The number of breweries in the U.S. has increased from 1,447 in 2005 to more than 5,300 in 2017. Much of that expansion is tied to craft brews. Today, the segment is responsible for about 10% of domestic beer production. In addition, a growing number of drinkers are turning to spirits and mixed drinks in place of beer, which saw volumes drop 1.8% around the world in 2016, according to IWSR.

It's not surprising that given these changing dynamics, Molson Coors is seeing challenges in its core business. While the company's worldwide beer volume increased after adding its Miller global brand business, and growth occurred in some of its core brands, the closely followed financial volume figure dropped 0.4% and net sales per hectoliter fell 0.2%. Molson Coors did see positive growth in Europe, where brand volume increased 11.5%.

Pete Coors, vice chairman of Molson Coors, said at the Beverage Forum in April he expected more mergers, but noted there are only a few remaining players left that could combine. "At some point down the road ... I have no doubt there will be additional consolidation globally," Coors said.